FactSet's Q1 2026 Earnings Call: Contradictions Emerge on AI Integration, Pricing, and Product Adoption Strategies

Date of Call: December 18, 2025

Financials Results

• Revenue: $608.0M, up 6.9% YOY (6% organic excluding FX & M&A)
• EPS: $4.51 adjusted diluted EPS, up 3% YOY
• Operating Margin: 36.2% adjusted operating margin

Guidance:

• Reaffirmed previously issued FY'26 guidance across all GAAP and adjusted metrics.
• Q2 operating margins expected to reflect a step-up in investments as headcount and technology resources ramp.
• Strategic investments are back‑half weighted (incremental headcount, software infrastructure, professional services) while productivity actions should offset some spend.
• Company remains prudent/conservative on phasing; pipeline described as healthy and management expects to convert opportunities through the year.

Business Commentary:

* Revenue and ASV Growth: - FactSet Research Systems Inc. reported revenue growth of 6.9% year-over-year to $608 million, while ASV increased by 5.9% to $2.4 billion. - Growth was driven by strong client adoption, strategic acquisitions, and expansion into new markets.

• AI Integration and Product Demand:
• FactSet experienced significant adoption of its AI products, with over 45% sequential growth this quarter.
• This demand was fueled by the integration of AI tools to enhance FactSet's existing product offerings, resonating well with clients.

• Regional and Firm Type Performance:
• In the Americas, organic ASV grew by 6%, while EMEA and Asia Pacific saw growth of 4% and 8%, respectively.

• Growth was driven by increased demand from asset managers and wealth management clients, as well as from middle office solutions and AI-ready data.

• Margin and Investment Strategy:

• FactSet's adjusted operating margin was 36.2%, with investments in data readiness and sales incentives to drive growth and productivity.
• The company is allocating resources towards improving client retention and expanding product offerings to maintain a sustainable growth trajectory.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted ASV growth of 5.9% and revenue of $608M, up 6.9% YOY; adjusted operating margin of 36.2% and adjusted EPS of $4.51, up 3% YOY. They increased buyback authorization from $400M to $1B and reaffirmed FY'26 guidance while describing a healthy pipeline and continued investments to drive growth.

Q&A:

• Question from Kelsey Zhu (Autonomous Research US LP): I feel like recently, there's been a lot of discussion around FactSet's competitive positioning versus AI startups. I'm actually more curious to hear your perspective on how FactSet is positioned amongst the Big 4 data incumbents. I think everyone is investing in AI infrastructure, everyone is launching new AI products and FactSet is a smaller one of the bunch. So just curious to hear your strategy to maintain share or gain share within the incumbents.
  Response: FactSet believes its proprietary data, tools and secure, integrated workstation differentiate it from incumbents; it partners with hyperscalers/startups and is winning multi‑year deals as clients consolidate AI solutions with FactSet.

• Question from Faiza Alwy (Deutsche Bank AG, Research Division): You talked about sort of simplifying pricing packaging, pricing to value and some of the changes around sales incentives, and it sounds like you're saying it's already led to faster sales motion and a richer pipeline. So would just love to hear a little bit more, sort of bring to life some of the changes that you have either already incorporated and the early results that you're seeing?
  Response: They realigned incentives and sales enablement, which has increased top‑of‑funnel lead generation and accelerated cross‑sell/upsell, producing faster sales motions and a richer pipeline so far.

• Question from Alex Kramm (UBS Investment Bank, Research Division): The other question I'm getting related to AI a lot when it comes to you guys is also how the hiring picture is going to look for your customer base in the future because, obviously, not only you, but your customers are talking about using AI for efficiencies. And I think 50% of your business is still a desktop business. So maybe you -- with your discussions you've been having with clients, where do you hear that the most? Like what client types do you think you can actually see some maybe customer reductions in terms of the seats? So -- and how do you stack up in those areas, meaning where do you see the biggest reduction of force? And how does this impact your kind of desktop-related businesses or could?
  Response: So far clients are not reducing headcount; banking is hiring due to M&A recovery and AI is driving higher consumption and workstation usage, so management expects increased consumption rather than seat reductions.

• Question from Manav Patnaik (Barclays Bank PLC, Research Division): In the slide you had on the margin impact for the '26 investments. Just kind of following up the -- what is the cadence, I guess, by quarter, we should be expecting on that 250 basis points gross investment? Like how much is done this quarter, for example? And then, are these one-time investments? Or should we anticipate like '27, '28, et cetera, having more of these as well?
  Response: Investments are a mix of foundational (incentives, cybersecurity/infrastructure) and targeted growth (content, workflows); Helen said spending is back‑half weighted—incremental headcount, software and largely one‑time professional services—while tech amortization rises through the year.

• Question from Shlomo Rosenbaum (Stifel, Nicolaus & Company): It seems like during the quarter, the company took a step forward in the organic growth in each of the geographic units. And what I'm trying to understand is how much of that is from the -- Sanoke, maybe you're letting a fire on your people more over the near term in terms of closing some of the business and getting things done? And how much of it is that you're really seeing an improvement out there in the environment in general?
  Response: Both—management sees stronger market sentiment and a healthier pipeline plus company initiatives (investments, retention, trading solutions) that improved sales execution and retention; contributions are diversified across regions and products.

• Question from Thomas Roesch (William Blair & Company L.L.C.): I was wondering if you could speak to how AI contributed -- your AI products contributed to ASV growth in the quarter? And kind of any color you could add on how it's driving new wins, displacing incumbents or just helping retention?
  Response: AI is embedded across products rather than a separate line; adoption of AI launches grew >45% quarter‑over‑quarter and serves as a conversion accelerator and tailwind to ASV growth.

• Question from Keen Fai Tong (Goldman Sachs Group, Inc., Research Division): You talked about leaning into productivity initiatives like ingesting data better, modernizing your tech platform and driving service team efficiencies. At the same time, you're investing in the sales and tech infrastructure and that's causing operating margins to decline about 150 bps for the full year fiscal '26 just based on guidance. How do you think about balancing investments with your ability to drive margin expansion?
  Response: They view investments as deliberate: structural platform consolidation to drive medium‑term operating leverage, plus growth spend (content, AI) that should increase revenue—accepting near‑term margin pressure to enable higher margins longer term.

• Question from Toni Kaplan (Morgan Stanley, Research Division): The organic ASV growth has been accelerating for the past 3 quarters and is better than I was expecting in this quarter. And so just based on the guide, it looks like you're expecting it to decelerate from the current level, and this is despite sort of the confidence and momentum, good pipeline and the investments. And so I was just wondering, is this just conservatism? Or is there something that you're seeing that would imply that growth slows towards the end of the fiscal year, maybe it's the tough comp? Just wanted to understand, what would drive the guidance or not to be a little bit higher and sort of what factors might go into sort of getting to the low end of the range versus the high end of the range on organic ASV?
  Response: Management is confident in the pipeline but is being prudent early in the fiscal year; guidance reflects conservatism given remaining execution risk and seasonality.

• Question from Jeffrey Silber (BMO Capital Markets Equity Research): I really appreciate the -- I think it was Slide 7 in your deck, where you try to calculate what of your products and services are proprietary versus nonproprietary. Can you give us a little bit of color how you came up with what exactly went in each bucket?
  Response: They classify by provenance and enrichment: ~40% client‑proprietary data, ~50% proprietary/enriched (e.g., CUSIP, RBICS, pricing/reference feeds), and ~10% technically public but heavily curated/enhanced (e.g., StreetAccount).

• Question from Surinder Thind (Jefferies LLC, Research Division): I just wanted to kind of ask about kind of the idea around the medium-term targets here, as you work towards establishing and you think about the growth in the margins. Like what are some of maybe the key considerations you're exploring here? It just seems that like with the pace of change, it's accelerating, how things might look out 2 or 3 years. There's just a lot of uncertainty. So would you be even able to build a medium-term outlook that you can have confidence in?
  Response: Management is actively developing a medium‑term strategy, sees significant opportunities from changing market dynamics, and expects to present credible medium‑term guidance in future quarters.

• Question from Jason Haas (Wells Fargo Securities, LLC, Research Division): Based on some of the comments, it sounds like you're selling more AI-ready data through feeds and APIs, and presumably, your clients are going to be using that data with their own AI solutions. And I think there's a thought out there that this would be a first step to potentially those clients not needing as many workstation subscriptions. So I'm curious if you could comment on that. And then, it's related to, I want to also ask, are you able to talk about how the margins on those that like feeds business compares to the margins when you sell a Workstation product?
  Response: Management views the workstation as a distribution channel and expects multi‑channel consumption to be additive (1+1=3); feeds and workstation are complementary and both offer strong margin opportunities.

• Question from Scott Wurtzel (Wolfe Research, LLC): Just wanted to ask on sort of private market data offering, and there's been a lot of, I think, investment in the space from yourself and your peers as well in terms of increasing the magnitude of data that you have on private companies. Just wondering, how you sort of feel about your competitive position with your private markets data and if that is an investment priority for you over the course of the next 12 months here?
  Response: Private capital is a clear investment priority; FactSet has invested for years, covering ~10M private companies with high‑quality data to support clients across pre‑deal, deal and post‑deal workflows.

• Question from David Motemaden (Evercore ISI Institutional Equities, Research Division): I wanted to just ask, it sounded like the pipeline is good, the environment is getting more constructive. Some of the changes to sales incentives and product investments have been gaining traction. But could you just help me reconcile that with the only 7 net new clients that were added this quarter?
  Response: Q1 is seasonally light for net client additions; management said ASV from new business is strong and a robust pipeline should drive more client adds later in the year.

Contradiction Point 1

AI Integration and Impact on Client Engagement

It involves the integration of AI and its impact on client engagement, which has implications for client retention and revenue generation.

What is the timeline for the fiscal '26 investment impact, and are these investments one-time or recurring? - Manav Patnaik(Barclays Bank PLC, Research Division)

2026Q1: FactSet's open architecture integrates AI to enhance internal efficiencies and client services. AI products are stand-alone and monetized, with a middle ground of AI influencing client decisions. AI tools are pivotal in renewals and new deals, with significant contributions to sales in Q4. - Sanoke Viswanathan(CEO & Director), Helen Shan(CFO)

How is FactSet using AI to improve internal efficiencies and client engagement, and are AI products having an impact? - Kelsey Zhu(Autonomous Research US LP)

2025Q4: FactSet's open architecture integrates AI to enhance internal efficiencies and client services. AI products are stand-alone and monetized, with a middle ground of AI influencing client decisions. AI tools are pivotal in renewals and new deals, with significant contributions to sales in Q4. - Sanoke Viswanathan(CEO & Director), Helen Shan(CFO)

Contradiction Point 2

Investment Strategy and Pricing Discipline

It involves the company's investment strategy and pricing discipline, which are crucial for maintaining market position and revenue growth.

How does FactSet compete with Big 4 data providers amid AI adoption, and how does its distribution strategy complement them? - Kelsey Zhu(Autonomous Research US LP)

2026Q1: FactSet is at an AI-driven strategic inflection point. We're leveraging AI to become the leading AI-powered financial intelligence platform. AI is a significant competitive advantage, enabling FactSet to enhance client solutions and drive growth. We will focus on understanding client priorities and product road maps for a successful AI implementation. - Sanoke Viswanathan(CEO & Director)

Is the AI investment necessary for maintaining market position or accelerating growth? - Shlomo Rosenbaum(Stifel, Nicolaus & Company, Incorporated, Research Division)

2025Q4: AI opens opportunities for FactSet to lead in client conversations and product innovation. While we're early in the AI adoption lifecycle, investments are allowing us to stay ahead and be well-positioned for future growth. - Sanoke Viswanathan(CEO & Director)

Contradiction Point 3

AI Product Adoption and Growth

It involves differing perspectives on the growth and adoption of AI products, which are crucial for understanding the company's strategic direction and market positioning.

How is FactSet competing with Big 4 data providers in the AI era, and how does its distribution strategy complement these providers? - Kelsey Zhu (Autonomous Research US LP)

2026Q1: We are seeing a significant increase in adoption of AI-based solutions across our FactSet client base, with sequential growth in AI product adoption over 45%. - Sanoke Viswanathan(CEO & Director)

Can you clarify the costs of generative AI investments and if they will reduce SG&A expenses? - Andrew Nicholas (William Blair)

2023Q4: We're seeing a significant uptick in demand for productivity solutions as our clients grapple with headcount, work volume, and fixed budgets. - Helen Shan(CRO)

Contradiction Point 4

AI Product Adoption and Impact on ASV Growth

It involves the impact of AI product adoption on ASV growth, which directly affects the company's revenue and market position.

How did AI drive ASV growth, and what is its impact on new clients and customer retention? - Thomas Roesch (William Blair & Company L.L.C., Research Division) for Andrew Nicholas

2026Q1: AI is integrated across FactSet products, enhancing client offerings. Sequential growth in AI product adoption is over 45%. AI tailwinds the core business, aiding in client retention and expanding market reach. - Sanoke Viswanathan(CEO & Director)

Are the 10 signed deals and 45 opportunities with existing customers adopting Pitch Creator or new banks? - Andrew Owen Nicholas (William Blair & Company L.L.C.)

2025Q3: We are seeing good traction with our GenAI solutions. During the quarter, we signed 10 new deals, and we have 45 opportunities that are expected to be closed in the next fiscal year. And this is included in our fiscal '25 revenue guidance. - Goran Skoko(CRO)

Contradiction Point 5

Sales and Pricing Strategy

It involves changes in sales and pricing strategies, which are crucial for revenue growth and market competitiveness.

Could you explain the changes in sales incentives and packaging strategies to accelerate sales and build stronger pipelines? - Faiza Alwy (Deutsche Bank AG, Research Division)

2026Q1: FactSet has aligned incentives across the company to focus on new business development, cross-selling, and upselling. Incentives are now tied to these outcomes. Sales teams are seeing faster motions and expanded top-of-the-funnel lead generation. - Sanoke Viswanathan(CEO & Director)

Is there an expense or investment in Q4 that would cause adjusted operating margin to drop to ~34.6% to meet full-year guidance? - Owen Lau (Oppenheimer & Co. Inc.)

2025Q3: The workstation also benefited from some pricing actions that we took. Our focus continues to be on taking care of our existing clients, making sure that they get the right value for their spend with us. We have seen our renewal rates and retention rates improve over the last two quarters. - Helen L. Shan(CFO)